Baupost Letters: 1999

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October 9, 2013

Continuation in our series on portfolio management and Seth Klarman, with ideas extracted from old Baupost Group letters. Our Readers know that we generally provide excerpts along with commentary for each topic. However, at the request of Baupost, we will not be providing any excerpts, only our interpretive summaries, for this series. Sizing, Catalyst, Expected […]

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Bob Rodriguez’s Diversification Experiment

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September 22, 2013

Below are some portfolio management highlights from a recent interview (July 2013) with Bob Rodriguez and Dennis Bryan of First Pacific Advisors in Value Investor Insight. Especially intriguing is Bob’s description of his ongoing experiment related to the effects of diversification on portfolio returns. Diversification, Sizing, Volatility “Your portfolio today has fewer than 30 positions. […]

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Howard Marks’ Book: Chapter 14

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August 27, 2013

Continuation of portfolio management highlights from Howard Marks’ book, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Chapter 14 “The Most Important Thing Is…Knowing What You Don’t Know” Mistakes, Sizing, Diversification, Leverage, Opportunity Cost “…the biggest problems tend to arise when investors forget about the difference between probability and outcome – that is, when […]

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Embracing Chaos & Randomness

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August 17, 2013

Investing is hard on the psyche. Events don’t always make sense, yet external pressures often demand that you make sense of everything seemingly random. This can lead to frustration stemming from cognitive dissonance — the discomfort experienced when simultaneously holding two or more conflicting ideas, beliefs, values or emotional reactions. Perhaps this is why I enjoyed reading […]

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AUM’s Impact On Performance

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July 28, 2013

People often remark that “AUM is the enemy of performance.” But is this truly always the case? Here’s another thought-provoking excerpt from Stephen Duneier of Bija Capital Management that explores the nuances of the AUM-Performance relationship. AUM, Expected Return, Sizing, Selectivity, Liquidity “Since becoming a portfolio manager more than ten years ago, I have managed […]

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Michael Price & Portfolio Management

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July 21, 2013

Summaries below are extracted from a speech Michael Price gave at the 2013 (June) London Value Investor Conference. If you have read our previous article based on an interview Peter J. Tanous conducted with Michael Price many years ago, you’ll find that Price’s portfolio management philosophy has not changed much since then. Many thanks to […]

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The Managing vs. Marketing of Risk

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July 11, 2013

There’s something in the Santa Barbara water (or wine) that produces some extremely thoughtful investors/writers. Some of you already know that I’m a fan of Eric Peters of Weekend Notes (who resides in Santa Barbara). A friend recently told me about Stephen Duneier of Bija Capital Management (another Santa Barbara resident) who also has been writing […]

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PM Jar Exclusive Interview With Howard Marks – Part 5 of 5

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July 6, 2013

Below is Part 5 of PM Jar’s interview with Howard Marks, the co-founder and chairman of Oaktree Capital Management, on portfolio management. Part 5: Creating Your Own Art “You can glean insights from many places and then assemble them into your own formula. You can’t copy somebody else. Well you can – but that’s not […]

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PM Jar Exclusive Interview With Howard Marks – Part 4 of 5

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June 27, 2013

Below is Part 4 of PM Jar’s interview with Howard Marks, the co-founder and chairman of Oaktree Capital Management, on portfolio management. Part 4: The Art of Transforming Symmetry into Asymmetry “If tactical decisions like concentration, diversification, and leverage are symmetrical two-way swords, then where does asymmetry come from? Asymmetry comes from alpha, from superior […]

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PM Jar Exclusive Interview With Howard Marks – Part 3 of 5

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June 23, 2013

Below is Part 3 of PM Jar’s interview with Howard Marks, the co-founder and chairman of Oaktree Capital Management, on portfolio management. Part 3: The Intertwining Debate of Diversification and Concentration “Diversification in itself does not add or subtract value, it only affects the probabilities.” PM Jar: During times when you are overwhelmed by opportunities, […]

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PM Jar Exclusive Interview With Howard Marks – Part 2 of 5

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June 19, 2013

Below is Part 2 of PM Jar’s interview with Howard Marks, the co-founder and chairman of Oaktree Capital Management. In the excerpts below, Marks discusses his approach to the art of investing: transforming symmetrical inputs into asymmetric returns. Be sure to read Part 1: An Idea of What Is Enough. Part 2: Real World Considerations “You shouldn’t […]

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PM Jar Exclusive Interview With Howard Marks – Part 1 of 5

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June 17, 2013

“Investing is an art form. Take the hundred greatest painters, their paintings look nothing alike. The definition of great is not uniform.” When asked about the art on the walls, he answers he is not a collector, merely an admirer. There’s no corner office with custom or museum-quality furniture. There’s no glaring display of power […]

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How To Motivate Your Analysts

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June 13, 2013

I’ve always found it curious why talent turns over so frequently at investment firms (at least in hedge fund land). Investing is a judgment-oriented business, and team turnover can be highly disruptive to the investment process. To retain talent, most people throw money at the problem. The video below will show you why that doesn’t […]

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Bill Lipschutz: Dealing With Mistakes

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June 10, 2013

The following excerpts are derived from Jack Schwager’s interview with Bill Lipschutz in The New Market Wizards. Lipschutz helped build and ran Salomon’s currency desk for many years – here is a 2006 EuroMoney Article with additional background on Bill Lipschutz. There are number of worthwhile portfolio management tidbits here, mainly the relationship between making mistakes, […]

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More Than You Know: Chapter 1

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June 1, 2013

Below are numerous psychological gems extracted from Chapter 1 of More Than You Know by Michael Mauboussin. Also be sure to check out his thoughts on Process Over Outcome. Psychology, Sizing “The behavioral issue of overconfidence comes into play here. Research suggests that people are too confident in their own abilities and predictions. As a […]

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Baupost Letters: 1998

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May 25, 2013

Continuation in our series on portfolio management and Seth Klarman, with ideas extracted from old Baupost Group letters. Our Readers know that we generally provide excerpts along with commentary for each topic. However, at the request of Baupost, we will not be providing any excerpts, only our interpretive summaries, for this series. Hedging, Opportunity Cost, […]

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Consequences of Contrarian Actions

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May 9, 2013

Below are excerpts from a speech Bob Rodriguez of First Pacific Advisors gave in May 2009. Quite a few interesting lessons derived from his previous trials and tribulations in dealing with clients and redemptions during periods of contrarian actions and underperformance. Psychology “I believe I have found success because I have been deeply aware of […]

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Mauboussin on Position Sizing

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May 1, 2013

Below are excerpts from an article written by Michael Mauboussin in 2006 on the importance of position sizing (Size Matters). For fans of the Kelly formula, this is a must-read. Mauboussin highlights a few very important flaws of the Kelly formula when applied to our imperfect, non-normally distributed world of investing. Sizing, Diversification “To suppose […]

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Monkeys & Team Management

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April 26, 2013

The following video perfectly explains why (the perception of) fairness matters, and the degree to which fairness is built into our DNAs. Given the reaction of the monkey (compensated unfairly for task performed), this concept is pretty relevant to team management.    

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Mind of an Achiever

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April 20, 2013

In the competitive world of investing, each of us should constantly be seeking out competitive advantages. Personally, I believe that a certain degree of competitive advantage can be found in the cross-pollination of different schools of investment thought. Many in the value school often deride trading strategies, but they cannot deny the existence of those […]

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